The healthiest housing markets are in California and other areas in the western United States.

The top five markets with the healthiest index readings were San Jose (Index of 9), San Francisco (8.9), Los Angeles (8.6), San Diego (8.4), and Denver (8.1). The next five markets were Boston, Pittsburgh, Portland, New York, and Sacramento.

The study reveals home values in the leading market, San Jose, have increased 19.6 percent compared to one year ago, with a median selling price of $731,500. Home values in San Francisco, the second healthiest market, actually increased 24.1 percent.

Zillow’s chief economist Dr. Stan Humphries explained the benefits of the robust situation in these areas, and added a bit of caution: “Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity, and the overall financial health of local homeowners. But that same rapid

appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions,” he said.

“The housing market is complex, and while individual statistics can be useful in describing a single aspect of a given market, one number on its own can’t tell the full story,” Humphries continued. “As markets continue to evolve and recover, the Market Health Index will reflect these changing trends, offering consumers a valuable tool on which to base their decisions.”

Zillow’s Market Health Index measures different metrics on a scale from 0 to 10. Its purpose is to illustrate the current health of a region’s housing market compared to similar markets nationwide. It is calculated monthly to compare market trends by ZIP code, neighborhood, city, county, metro, and state levels. The findings include all single-family residences, condominiums and cooperatives.

Among the 10 categories Zillow measures are:

  • Changes in home values
  • How long homes stay on the market
  • Foreclosures
  • Delinquencies
  • Negative equity

A low Market Health Index score does not necessarily mean a market is performing poorly across all categories, but simply that other markets are performing a bit better in terms of increasing home values or fewer foreclosures.

 

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